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Report suggests new accounting for Texas schools

AUSTIN — Texas should simplify its accounting practices for public schools to make it easier for the average citizen to determine how districts are spending billions in state money every year, a new report funded by three private equity investors suggested Tuesday.

The report titled “No Financial Accountability” concludes school districts dutifully follow state rules and provide copious amounts of data in their annual financial statements. But it also shows they lump large expenditures into nebulous categories like “instruction” — which can mean everything from how much teachers are paid to the cost of insuring students in driver’s education.

“We’ve spoken to the wealthy districts, the poor districts and they’re all acting like, ‘Why are you surprised at this? ... These are the rules that we have to follow,’ ” said Mark Hurley, one of three co-authors who compiled the report over two years.

Hurley and his co-authors, Yvonne Kanner and Jonathan Yu, are private-equity investors who said they paid for the report on their own and do not have any financial links to public education. The group, he said, are simply citizens concerned about fairness in Texas education spending.

The authors tried to collect financial information from about 100 school districts statewide, and had about half comply, Hurley said. Some of the data was available on district websites, while other districts said compiling such information would take months and cost up to $10,000. The report does not identify the districts that provided data.

The report determined that in one district, just 22 percent of “instruction” funds actually go to paying teachers for teaching. Other districts list things like hotel expenses and staff Christmas gifts as instructional costs.

It says state rules mandate 29 categories of expenses be grouped under “instruction” in school districts’ financial reports. The category encompasses an average of 56 percent of all district expenditures, according to the state comptroller’s office.

Hurley said that while the report found most districts can track their funds down to the penny, the complicated accounting practices mean outsiders cannot.

“Local control is a fantasy if you don’t have financial accountability,” he said, “and the basis for financial accountability is that the average parent can pick up a district’s annual report and have an idea of how it’s spending money.”

Jenny LaCoste-Caputo, spokeswoman for the Texas Association of School Administrators, said that “transparency has become a buzzword, but what people don’t understand is that state budgets are always difficult to interpret.”

“Children aren’t widgets,” she said. “You can’t apply business practices to them and have it work very well.”

The state Legislature last year rewrote the school funding formula to cut $4 billion during the next two years Lawmakers also cut another $1.4 billion to grant programs. Per-student funding fell more than $500 last year, the first such decline since World War II.

Average statewide public school enrollment, meanwhile, is increasing by 80,000 students annually.

Four lawsuits have been filed on behalf of more than 500 school districts representing more than 3 million Texas students. They charge that the Legislature’s plan is not equitable in how it distributes funding to districts.

The private equity investors’ report concludes neither state lawmakers nor judges can really evaluate whether the system is fair without knowing how school districts spend their money. It suggests simplifying district financial statements and making all supporting documentation easier to classify and track. It also says the financial statements and supporting documents should be available on district websites.

Hurley said those changes could be implemented around the state as pilot programs, even as the lawsuits run their course.